PRINTER'S NO.  3019

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

2150

Session of

2012

  

  

INTRODUCED BY REED, DePASQUALE, CHRISTIANA, BENNINGHOFF, VULAKOVICH, AUMENT, BAKER, BOBACK, BOYD, CALTAGIRONE, CLYMER, CREIGHTON, CUTLER, DALEY, DUNBAR, D. EVANS, J. EVANS, EVERETT, FLECK, GEIST, GERGELY, GIBBONS, GINGRICH, GROVE, HALUSKA, HARHART, HARPER, HARRIS, HELM, HENNESSEY, HESS, M. K. KELLER, KILLION, KNOWLES, MAJOR, MALONEY, MANN, MARSICO, MICOZZIE, MILLARD, MIRABITO, MOUL, MURPHY, OBERLANDER, O'NEILL, PAYNE, PETRI, PICKETT, QUIGLEY, QUINN, READSHAW, REESE, ROCK, SAYLOR, SIMMONS, S. H. SMITH, STEPHENS, STEVENSON, STURLA, SWANGER, TALLMAN, TOBASH, VEREB AND WATSON, JANUARY 26, 2012

  

  

REFERRED TO COMMITTEE ON FINANCE, JANUARY 26, 2012  

  

  

  

AN ACT

  

1

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

2

act relating to tax reform and State taxation by codifying

3

and enumerating certain subjects of taxation and imposing

4

taxes thereon; providing procedures for the payment,

5

collection, administration and enforcement thereof; providing

6

for tax credits in certain cases; conferring powers and

7

imposing duties upon the Department of Revenue, certain

8

employers, fiduciaries, individuals, persons, corporations

9

and other entities; prescribing crimes, offenses and

10

penalties," in corporate net income, further providing for

11

definitions and for imposition of tax.

12

The General Assembly of the Commonwealth of Pennsylvania

13

hereby enacts as follows:

14

Section 1.  Section 401(3)2(a)(9) and 4(c) of the act of

15

March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of

16

1971, amended October 9, 2009 (P.L.451, No.48), are amended,

17

clause (3)1 is amended by adding a paragraph and the section is

18

amended by adding clauses to read:

 


1

Section 401.  Definitions.--The following words, terms, and

2

phrases, when used in this article, shall have the meaning

3

ascribed to them in this section, except where the context

4

clearly indicates a different meaning:

5

* * *

6

(3)  "Taxable income."  1.  * * *

7

(t)  For taxable years beginning after December 31, 2012, no

8

deduction shall be allowed for an intangible expense or cost

9

paid, accrued or incurred in connection with one or more

10

transactions with an affiliated entity. The following apply:

11

(i)  The adjustment required by this term shall not apply to

12

a transaction that was directly related to a valid business

13

purpose.

14

(ii)  In calculating taxable income, when the taxpayer is

15

engaged in one or more transactions with an affiliated entity

16

that was subject to tax in this Commonwealth or another state or

17

possession of the United States on a tax base that included the

18

intangible expense or cost paid, accrued or incurred by the

19

taxpayer, the taxpayer shall receive a credit against tax due in

20

this Commonwealth in an amount equal to the tax paid by the

21

affiliated entity with respect to the portion of its income

22

representing the intangible expense paid, accrued or incurred by

23

the taxpayer multiplied by the apportionment factor of the

24

taxpayer in this Commonwealth. The credit shall not exceed the

25

taxpayer's liability in this Commonwealth attributable to the

26

net income taxed as a result of the adjustment required by this

27

term.

28

2.  In case the entire business of any corporation, other

29

than a corporation engaged in doing business as a regulated

30

investment company as defined by the Internal Revenue Code of

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1

1986, is not transacted within this Commonwealth, the tax

2

imposed by this article shall be based upon such portion of the

3

taxable income of such corporation for the fiscal or calendar

4

year, as defined in subclause 1 hereof, and may be determined as

5

follows:

6

(a)  Division of Income.

7

* * *

8

(9)  (A)  Except as provided in subparagraph (B):

9

(i)  For taxable years beginning before January 1, 2007, all

10

business income shall be apportioned to this State by

11

multiplying the income by a fraction, the numerator of which is

12

the property factor plus the payroll factor plus three times the

13

sales factor and the denominator of which is five.

14

(ii)  For taxable years beginning after December 31, 2006,

15

all business income shall be apportioned to this State by

16

multiplying the income by a fraction, the numerator of which is

17

the sum of fifteen times the property factor, fifteen times the

18

payroll factor and seventy times the sales factor and the

19

denominator of which is one hundred.

20

(iii)  For taxable years beginning after December 31, 2008,

21

all business income shall be apportioned to this State by

22

multiplying the income by a fraction, the numerator of which is

23

the sum of eight and a half times the property factor, eight and

24

a half times the payroll factor and eighty-three times the sales

25

factor and the denominator of which is one hundred.

26

(iv)  For taxable years beginning after December 31, 2009,

27

all business income shall be apportioned to this State by

28

multiplying the income by a fraction, the numerator of which is

29

the sum of five times the property factor, five times the

30

payroll factor and ninety times the sales factor and the

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1

denominator of which is one hundred.

2

(v)  For taxable years beginning after December 31, 2012, all

3

business income shall be apportioned to this State by

4

multiplying the income by the sales factor.

5

(B)  For purposes of apportionment of the capital stock -

6

franchise tax as provided in section 602 of Article VI of this

7

act, the apportionment fraction shall be the property factor

8

plus the payroll factor plus the sales factor as the numerator,

9

and the denominator shall be three.

10

* * *

11

4.  * * *

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(c)  (1)  The net loss deduction shall be the lesser of:

13

(A)  (I)  For taxable years beginning before January 1, 2007,

14

two million dollars ($2,000,000);

15

(II)  For taxable years beginning after December 31, 2006,

16

the greater of twelve and one-half per cent of taxable income as

17

determined under subclause 1 or, if applicable, subclause 2 or

18

three million dollars ($3,000,000);

19

(III)  For taxable years beginning after December 31, 2008,

20

the greater of fifteen per cent of taxable income as determined

21

under subclause 1 or, if applicable, subclause 2 or three

22

million dollars ($3,000,000);

23

(IV)  For taxable years beginning after December 31, 2009,

24

the greater of twenty per cent of taxable income as determined

25

under subclause 1 or, if applicable, subclause 2 or three

26

million dollars ($3,000,000); [or]

27

(V)  For taxable years beginning after December 31, 2013, the

28

greater of twenty-nine per cent of taxable income as determined

29

under subclause 1 or, if applicable, subclause 2 or four million

30

dollars ($4,000,000);

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1

(VI)  For taxable years beginning after December 31, 2014,

2

the greater of thirty-eight per cent of taxable income as

3

determined under subclause 1 or, if applicable, subclause 2 or

4

five million dollars ($5,000,000);

5

(VII)  For taxable years beginning after December 31, 2015,

6

the greater of forty-seven per cent of taxable income as

7

determined under subclause 1 or, if applicable, subclause 2 or

8

six million dollars ($6,000,000);

9

(VIII)  For taxable years beginning after December 31, 2016,

10

the greater of fifty-six per cent of taxable income as

11

determined under subclause 1 or, if applicable, subclause 2 or

12

seven million dollars ($7,000,000);

13

(IX)  For taxable years beginning after December 31, 2017,

14

the greater of sixty-four per cent of taxable income as

15

determined under subclause 1 or, if applicable, subclause 2 or

16

eight million dollars ($8,000,000);

17

(X)  For taxable years beginning after December 31, 2018, the

18

greater of seventy-three per cent of taxable income as

19

determined under subclause 1 or, if applicable, subclause 2 or

20

nine million dollars ($9,000,000);

21

(XI)  For taxable years beginning after December 31, 2019,

22

the greater of eighty-two per cent of taxable income as

23

determined under subclause 1 or, if applicable, subclause 2 or

24

ten million dollars ($10,000,000);

25

(XII)  For taxable years beginning after December 31, 2020,

26

the greater of ninety-one per cent of taxable income as

27

determined under subclause 1 or, if applicable, subclause 2 or

28

eleven million dollars ($11,000,000);

29

(XIII)  For taxable years beginning after December 31, 2021,

30

taxable income as determined under subclause 1 or, if

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1

applicable, subclause 2; or

2

(B)  The amount of the net loss or losses which may be

3

carried over to the taxable year or taxable income as determined

4

under subclause 1 or, if applicable, subclause 2.

5

(1.1)  In no event shall the net loss deduction include more

6

than five hundred thousand dollars ($500,000), in the aggregate,

7

of net losses from taxable years 1988 through 1994.

8

(2)  (A)  A net loss for a taxable year may only be carried

9

over pursuant to the following schedule:

10

Taxable Year

Carryover

11

1981

1 taxable year

12

1982

2 taxable years

13

1983-1987

3 taxable years

14

15

16

17

1988

  

  

  

2 taxable years plus 1 taxable year starting with the 1995 taxable year

18

19

20

21

1989

  

  

  

1 taxable year plus 2 taxable years starting with the 1995 taxable year

22

23

24

1990-1993

  

  

3 taxable years starting with the 1995 taxable year

25

1994

1 taxable year

26

1995-1997

10 taxable years

27

1998 and thereafter

20 taxable years

28

(B)  The earliest net loss shall be carried over to the

29

earliest taxable year to which it may be carried under this

30

schedule. The total net loss deduction allowed in any taxable

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1

year shall not exceed:

2

(I)  Two million dollars ($2,000,000) for taxable years

3

beginning before January 1, 2007.

4

(II)  The greater of twelve and one-half per cent of the

5

taxable income as determined under subclause 1 or, if

6

applicable, subclause 2 or three million dollars ($3,000,000)

7

for taxable years beginning after December 31, 2006.

8

(III)  The greater of fifteen per cent of the taxable income

9

as determined under subclause 1 or, if applicable, subclause 2

10

or three million dollars ($3,000,000) for taxable years

11

beginning after December 31, 2008.

12

(IV)  The greater of twenty per cent of the taxable income as

13

determined under subclause 1 or, if applicable, subclause 2 or

14

three million dollars ($3,000,000) for taxable years beginning

15

after December 31, 2009.

16

(V)  The greater of twenty-nine per cent of taxable income as

17

determined under subclause 1 or, if applicable, subclause 2 or

18

four million dollars ($4,000,000) for taxable years beginning

19

after December 31, 2013.

20

(VI)  The greater of thirty-eight per cent of taxable income

21

as determined under subclause 1 or, if applicable, subclause 2

22

or five million dollars ($5,000,000) for taxable years beginning

23

after December 31, 2014.

24

(VII)  The greater of forty-seven per cent of taxable income

25

as determined under subclause 1 or, if applicable, subclause 2

26

or six million dollars ($6,000,000) for taxable years beginning

27

after December 31, 2015.

28

(VIII)  The greater of fifty-six per cent of taxable income

29

as determined under subclause 1 or, if applicable, subclause 2

30

or seven million dollars ($7,000,000) for taxable years

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1

beginning after December 31, 2016.

2

(IX)  The greater of sixty-four per cent of taxable income as

3

determined under subclause 1 or, if applicable, subclause 2 or

4

eight million dollars ($8,000,000) for taxable years beginning

5

after December 31, 2017.

6

(X)  The greater of seventy-three per cent of taxable income

7

as determined under subclause 1 or, if applicable, subclause 2

8

or nine million dollars ($9,000,000) for taxable years beginning

9

after December 31, 2018.

10

(XI)  The greater of eighty-two per cent of taxable income as

11

determined under subclause 1 or, if applicable, subclause 2 or

12

ten million dollars ($10,000,000) for taxable years beginning

13

after December 31, 2019.

14

(XII)  The greater of ninety-one per cent of taxable income

15

as determined under subclause 1 or, if applicable, subclause 2

16

or eleven million dollars ($11,000,000) for taxable years

17

beginning after December 31, 2020.

18

(XIII)  For taxable years beginning after December 31, 2021,

19

taxable income as determined under subclause 1 or, if

20

applicable, subclause 2.

21

* * *

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(8)  "Intangible expense or cost."  Royalties, licenses or

23

fees paid for the acquisition, use, maintenance, management,

24

ownership, sale, exchange or other disposition of patents,

25

patent applications, trade names, trademarks, service marks,

26

copyrights, mask works or other similar expenses or costs.

27

(9)  "Affiliated entity."  A person with a relationship to

28

the taxpayer during all or any portion of the taxable year that

29

is any of the following:

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(i)  a stockholder who is an individual, or a member of the

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1

stockholder's family as set forth in section 318 of the Internal

2

Revenue Code of 1986 (26 U.S.C. § 318), if the stockholder and

3

the members of the stockholder's family own, directly,

4

indirectly, beneficially or constructively, in the aggregate, at

5

least fifty per cent of the value of the taxpayer's outstanding

6

stock;

7

(ii)  a stockholder, or a stockholder's partnership, limited

8

liability company, estate, trust or corporation, if the

9

stockholder and the stockholder's partnerships, limited

10

liability companies, estates, trusts and corporations own

11

directly, indirectly, beneficially or constructively, in the

12

aggregate, at least fifty per cent of the value of the

13

taxpayer's outstanding stock;

14

(iii)  a corporation, or a party related to the corporation

15

in a manner that would require an attribution of stock from the

16

corporation to the party or from the party to the corporation

17

under the attribution rules of the Internal Revenue Code of

18

1986, if the taxpayer owns, directly, indirectly, beneficially

19

or constructively, at least fifty per cent of the value of the

20

corporation's outstanding stock. The attribution rules of

21

section 318 of the Internal Revenue Code of 1986 shall apply for

22

purposes of determining whether the ownership requirements of

23

this definition have been met;

24

(iv)  a component member as defined in section 1563(b) of the

25

Internal Revenue Code of 1986; or

26

(v)  a person to or from whom there is attribution of stock

27

ownership in accordance with section 1563(e) of the Internal

28

Revenue Code of 1986.

29

(10)  "Valid business purpose."  A purpose, other than the

30

avoidance or reduction of taxation, which alone or in

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1

combination with other purposes constitute the primary

2

motivation for a business activity or transaction which changes

3

in a meaningful way, apart from a reduction of taxation, the

4

economic position of a taxpayer. The economic position of the

5

taxpayer includes an increase in the market share of the

6

taxpayer or the entry of the taxpayer into new business markets.

7

A transaction done at arm's length shall be presumed to be

8

directly related to a valid business purpose.

9

Section 2.  Section 402(b) of the act, amended June 29, 2002

10

(P.L.559, No.89), is amended to read:

11

Section 402.  Imposition of Tax.--* * *

12

(b)  The annual rate of tax on corporate net income imposed

13

by subsection (a) for taxable years beginning for the calendar

14

year or fiscal year on or after the dates set forth shall be as

15

follows:

16

Taxable Year

Tax Rate

17

18

[January 1, 1995, and each

taxable year thereafter

  

9.99%]

19

20

21

January 1, 1995, and each

taxable year through December

31, 2013

  

  

9.99%

22

23

January 1, 2014, through

December 31, 2014

  

9.49%

24

25

January 1, 2015, through

December 31, 2015

  

8.99%

26

27

January 1, 2016, through

December 31, 2016

  

8.49%

28

29

January 1, 2017, through

December 31, 2017

  

7.99%

30

January 1, 2018, through

  

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1

December 31, 2018

7.49%

2

3

January 1, 2019, and each

taxable year thereafter

  

6.99%

4

* * *

5

Section 3.  This act shall take effect immediately.

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